Thursday, April 09, 2009

Dateline Beijing

Our reporter in Beijing knows how to meet a deadline.

Hi Matt and Dora:

Arrived in Beijing today. The flight was perfect. I went through the security area so fast (leave your shoes on) that I lost my usual rhythm and nearly left by back pack behind. Everyone at the airport was very helpful, calm, unrushed and pleasant. Beijing is very different from Shanghai. Slower pace, less jarring, architecture makes you feel your are in a community, no apartment high-rises surrounded by nothing, I read your paper concerning housing costs on the flight and I verify the part about building height. Today we wander, tomorrow we tour.

Today, Enrico Moretti will be back at his old UCLA to present this paper. http://emlab.berkeley.edu/~moretti/inequality.pdfMy Insitute has mananged to schedule a meeting at the same time as his seminar. This is the type of issue I run into because I don't have a 100% economics appointment.

Part of what Moretti will argue that people in big cities who have high nominal pay do not have that high real wages because real estate is expensive in big cities.

Mike Cragg and I in our classic 1999 RSUE piece thought about this issue. Suppose that in 1980 we all live in North Dakota in a house valued at $25,000 and then by the year 2000, we move to California and live in homes valued at $300,000.

Would a BLS researcher say; "Well sharp inflation here; a home's price went up 275/25 over 20 years".

A compensating differentials guy would say that the two homes have different characteristics and if you do a hedonic adjustment for differential local public goods such as climate in California and North Dakota, once you adjust for these factors there may have been no "inflation" at all. just different prices along the same hedonic pricing surface. So, Cragg and I estimate the repeat hedonic climate pricing regressions to test this claim.